OPEC countries refuse to reduce oil production in order to stabilize the world market, thereby increasing the pressure on its competitors. Russia is ready to accept OPEC’s challenge.
At the industry event in December, the Deputy of Energy Minister of Russia Kirill Molodtsov said that Russian oil companies will for sure reduce production only when the oil will cost $0.
According to most experts, Russia intends to keep the strike for several reasons. The first one is the race for leadership. In 2015, Russian oil production has updated records aided by the first recession in Russian economy since 2009. Economic contraction continues; it is planned to maintain the level of oil production in the amount of 525-533 million tons next year as it was included into the federal budget.
The second reason is the export’s growth. At the moment, modernization of Russian refineries is completed. Advanced technologies allow reduce domestic consumption of raw materials, providing new volumes of oil export, which gives more profit than domestic sales.
According to the Ministry of Energy, oil export will be 237 million in 2015. Within the framework of a more optimistic forecast, export may grow by 2-3 million tons per year in 2015-2017.
A weak ruble and tax cuts is another reason to oppose OPEC. Due to the ruble devaluation Brent prices fell more than 20% for the Russian oil companies since the year start, while the international oil companies lost around 30% of their profit. The tax burden on the Russian company is directly related to commodity prices, which has supported the Russian fuel and energy complex.
In addition, major part of Russian oil is produced at Western Siberia locations, which were discovered during the Soviet era. It should be mentioned that the cost of production in these regions is below the average.
